Net worth can be defined as the total of all you own when your liabilities are being taken away. It helps you gauge your financial status and success.
There are two kinds of net worth:
Liquid net worth: This is the amount of cash or assets that can be easily turned into cash.
Illiquid net worth: This kind of asset cannot be turned into cash easily. They are also referred to as nonliquid assets. An example is real estate.
To increase your net worth, you should consider the following:
Audit your liabilities and get rid of debt
You should take out time to evaluate all of your liabilities and debts. How much do you owe? Are there interests accruing? What recurring expenses do you have? Lowering your debt is one way to increase how much you have. You have to examine if some expenses are avoidable, or if there are wiser ways to go about them. Is your first resort when you are in need, to go borrowing? What do you spend the most on? If your loans are not used to fund assets, you are making a wrong financial decision, which will affect your net worth.
Have an emergency fund
An emergency fund is simply funds set aside for urgent needs. These could include medical emergencies, family needs, automobile emergencies, etc. In dealing with emergencies, you must first ensure you prevent them. You do not wait until your appliances, health, and equipment are worn out before they are changed. If you prepare to make these changes periodically, you might end up not using your emergency fund.
However, it is wise to set aside an emergency fund so that you are never caught unaware.
Live below your means
You do not spend as much as you earn, you spend less than you earn. You have to create a list of all your expenses and rank them based on priorities (needs and wants). Some things are considered necessities, and others might be luxuries. Until you are financially capable of funding your luxury without hassles, you should ensure you satisfy only your basic needs. Some of the things to cut down on might be eating out, buying trendy items and gadgets, expensive hobbies, unused subscriptions and club memberships, etc. You might not have to completely stop them, but make required adjustments and save a lot more money.
Have a salary
There is a concept known as paying yourself first. Out of the money you earn, you need to orient yourself with the knowledge that not all the money you make should be spent. Out of it, you will determine how much you should be paid, how much should be invested, and how much should be set aside for recurrent bills. This forces you to spend within a boundary, and not go outside of it.
Invest in your personal growthTo improve your net worth, you must grow in knowledge. Financial literacy is undoubtedly the best way to grow in wealth. You will know how and when to diversify your resources. Personal growth also entails your physical health and mental well-being. It is an unwise bargain to jeopardize your health, to seek financial gain. Investing in your personal growth will make you aware of different areas attention should be paid to, for holistic growth to occur.
Find new streams of income
Diversity is where the monies multiply. You cannot increase your net worth when you are dependent on only one stream of income. This will help you pay up debts sooner and live more comfortably. You can increase your salary, and save up more time by outsourcing labor. Seek opportunities where your skill and talent will excel and diversify your stream of income.
One overlooked step is speaking to a financial expert or professional, who can walk you through the nitty-gritty of the financial market and provide tailor-made solutions for you. You can also learn from their mistakes and the assets worth investing in.
Your net worth is a reflection of your financial knowledge and decisions. Always seek ways to improve its outlook.Featured Image Source: 100 Women.ng
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